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The Advocacy-Centered Company:
A deeper look at CAC and LTV
Bowery Capital CFO Summit
August 6, 2013
2
About Influitive
2013 Cool Vendor in
Social Marketing
Influitive helps B2B
marketers recruit,
mobilize and recognize
an ...
3
Double-Entry Daddy? Lady of the Ledgers?
No thanks!
Bookkeeping Boss ManBig Chief Beancounter
Historical Cost Head Honch...
4
A monster of a company – 20X sales – at scale
Source: Yahoo! Finance
5
A roadmap for a 20X sales (!) valuation
Sustainable com-
petitive advantage
Network effects
Predictability
Switching cos...
6
A partner for maximizing big picture ROA
Cash
Talent
Customers
Reputation
*
*
* Highly leveraged!
7
CAC and LTV: Customer Profitability
What we want to see!
Source: David Skok’s ForEntrepreneurs Blog, 2010 (http://bit.ly...
8
Advocates drive customer profitability
Source: David Skok’s ForEntrepreneurs Blog, 2010 (http://bit.ly/bZpMfB)
9
CAC: Customer advocates generate better leads &
drive the most efficient buying process
Source: Eloqua data, Sirius Deci...
10
LTV: Second order revenue effects are huge and
should be modeled explicitly
Source: Jason Lemkin’s SaaStr Blog, 2013 (h...
11
LTV
CAC
LTV
EV
EV
2X
Business Model - Today Business Model – with Advocates
A high ratio of LTV to CAC drives profitabi...
12
13
$0
$10
$20
$30
$40
$50
$60
$70
Week 1 Month 1 Year 1 Subsequent years
Customer
Onboarding
First
experience
First month ...
14
Product Management should forecast value, and
backtest to ensure value is delivered
Source: Influitive data
SUM
Close N...
15
CS analytics to focus time on renewal saves and
upsells in creating customer value surplus
Value received by customer*
...
16
Advocate mobilization capability allows more investment in customer
value surplus
Source: Influitive data
Marginal cost...
17
To mobilize advocates, you need an advocate
marketing program
18
1. Part of the Team
What motivates advocates?
1
19
2. Measurable Impact
What motivates advocates?
2
20
3. Social Currency
What motivates advocates?
3
21
500% increase
in award
submissions
26 customer videos
captured
in 2 days
17 positive
product reviews
on Quora
#1 search...
22
>150 super high quality new referral leads
per month from integrated referral program
100X higher survey response from ...
23
Influitive advocate engagement metrics
Source: Influitive data
24
Influitive advocate retention metrics
Cohort Analysis measuring engagement over months.
Source: Influitive data
25
Advocacy impact on CAC
231 referrals
4.1 activities per
visit
13 visits to VIP
per month
90% Cust.
Advocacy rate*
Sales...
26
Advocacy impact on LTV
26% Advocate
Conversion
73% Advocate
Monthly
Retention Rate*
2108 Total
Activities
Advocacy Metr...
27
Integrated advocate marketing to drive lower CAC
OutboundInbound
Advocate WOM
1. Expanded referral
program yields
targe...
28
Integrate advocates into account management
process to drive higher LTV
Demand / Value received
AnnualSubscriptionReven...
29
QUESTIONS?
@markorgan
@influitive
APPENDIX
31
Marketers are no longer in control of the buying
process
0%
10%
20%
30%
40%
50%
60%
70%
2006 2010 2014F
Dependence on k...
32
Experience is poor for advocates today
What advocates seek:
Status
Recognition
Career value
Connections
Part of the tea...
33
Experience is also poor for B2B companies today
No self service
solution
Weak integration
and analytics
Data is all ove...
34
Our current paying customers include many
leading software and technology companies
35
AdvocateHub has truly changed the way some of the
best B2B companies run their businesses
“Without hyperbole, I literal...
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The Advocacy-Centered Company: A deeper look at CAC and LTV

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Mark Organ's presentation at the Bowery Capital CFO Summit on August 6, 2013.

Advocates are helpful in so many aspects of the business – pretty much every key metric you can name can be improved when you get advocates involved. Veteran SaaS CFOs have learned to shine a light on net churn metrics – renewal and growth of accounts. Can advocates help there? Absolutely.

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The Advocacy-Centered Company: A deeper look at CAC and LTV

  1. 1. The Advocacy-Centered Company: A deeper look at CAC and LTV Bowery Capital CFO Summit August 6, 2013
  2. 2. 2 About Influitive 2013 Cool Vendor in Social Marketing Influitive helps B2B marketers recruit, mobilize and recognize an army of advocates that outsell their best sales reps. WHO WE ARE: • Founded in 2010 • Toronto, Bay Area and Boston • >$11M raised from top tier investors SELECT CUSTOMERS:
  3. 3. 3 Double-Entry Daddy? Lady of the Ledgers? No thanks! Bookkeeping Boss ManBig Chief Beancounter Historical Cost Head Honcho Trial Balance Top Dog Lady of the LedgerKing of the Counters Double-Entry Daddy Numerate Nobleman Penny President Bookkeeping Big Cheese Sir of the Spreadsheets Ruler of ResultsCFO Nicknames Source: Zazzle.com & the-alternative-accountant.com
  4. 4. 4 A monster of a company – 20X sales – at scale Source: Yahoo! Finance
  5. 5. 5 A roadmap for a 20X sales (!) valuation Sustainable com- petitive advantage Network effects Predictability Switching costs Gross margin Marginal profitability Customer concentration Partner dependence Customer acqui- sition efficiency Growth! Source: Bill Gurley’s Above The Crowd Blog, 2011 (bit.ly/jX4nB0)
  6. 6. 6 A partner for maximizing big picture ROA Cash Talent Customers Reputation * * * Highly leveraged!
  7. 7. 7 CAC and LTV: Customer Profitability What we want to see! Source: David Skok’s ForEntrepreneurs Blog, 2010 (http://bit.ly/bZpMfB) LTV = ARPU x Average Lifetime of a Customer – the Cost to Serve them (COGS) CAC = Total cost of Sales & Marketing / No of Deals closed
  8. 8. 8 Advocates drive customer profitability Source: David Skok’s ForEntrepreneurs Blog, 2010 (http://bit.ly/bZpMfB)
  9. 9. 9 CAC: Customer advocates generate better leads & drive the most efficient buying process Source: Eloqua data, Sirius Decisions
  10. 10. 10 LTV: Second order revenue effects are huge and should be modeled explicitly Source: Jason Lemkin’s SaaStr Blog, 2013 (http://bit.ly/14fYjiF) Total revenue from customer Base Base Base Upsell Upsell 0 10000 20000 30000 40000 50000 60000 Year 1 Year 2 Year 3 Total First order Champion Change Word-of- Mouth Total second order
  11. 11. 11 LTV CAC LTV EV EV 2X Business Model - Today Business Model – with Advocates A high ratio of LTV to CAC drives profitability – and enterprise value CAC LTV 4X
  12. 12. 12
  13. 13. 13 $0 $10 $20 $30 $40 $50 $60 $70 Week 1 Month 1 Year 1 Subsequent years Customer Onboarding First experience First month First year Subsequent years How to build advocates? Create a massive customer value surplus Customer value surplus Value to customer Cost to customer ≈ cust. expectations Critically important that early interactions offer a very high degree of surplus
  14. 14. 14 Product Management should forecast value, and backtest to ensure value is delivered Source: Influitive data SUM Close New Revenue/Pilots Retain customers, convert pilots Competitive Differen- tiation Strategic Investment Platform Improve- ments Improves Advocate Experience Embeds 11 2 2 3 2 2 Community 9 3 2 3 1 Maven 9 2 1 2 3 1 Referrals 11 2 3 2 1 3 Employee Advocates 7 3 2 2 Reviews 9 3 2 2 2 AdvocateHub API 6 2 3 1 Event Streaming 3 3 Admin Stuff 2 2 • 4% conversion of embedded display to completion • 40% of completes join the advocate program • 80% would recommend process to a colleague Assumptions: Backtest every quarter
  15. 15. 15 CS analytics to focus time on renewal saves and upsells in creating customer value surplus Value received by customer* AnnualSubscriptionRevenue($) Source: Scout Analytics Categorization Explanation Retention risk These customers pay significant $ but fail to receive much value today Up-Sell These customers receive significant value in excess of payment Cross-Sell These customers receive good value for the money
  16. 16. 16 Advocate mobilization capability allows more investment in customer value surplus Source: Influitive data Marginal cost Marginal benefit Total investment in customer experience Marginal cost/value Status Quo: Invest in CX so that marginal benefit = marginal cost …raising the optimal level of spending on CX Advocate mobilization increases marginal benefit to investing in CX....
  17. 17. 17 To mobilize advocates, you need an advocate marketing program
  18. 18. 18 1. Part of the Team What motivates advocates? 1
  19. 19. 19 2. Measurable Impact What motivates advocates? 2
  20. 20. 20 3. Social Currency What motivates advocates? 3
  21. 21. 21 500% increase in award submissions 26 customer videos captured in 2 days 17 positive product reviews on Quora #1 search result in Google! Integrated advocate marketing at Source: Influitive data
  22. 22. 22 >150 super high quality new referral leads per month from integrated referral program 100X higher survey response from advocates Advocate marketing at Source: Influitive data
  23. 23. 23 Influitive advocate engagement metrics Source: Influitive data
  24. 24. 24 Influitive advocate retention metrics Cohort Analysis measuring engagement over months. Source: Influitive data
  25. 25. 25 Advocacy impact on CAC 231 referrals 4.1 activities per visit 13 visits to VIP per month 90% Cust. Advocacy rate* Sales Conversion Marketing program costs High Cost Sales Touches Personnel costs 33% 10% 47% Advocacy Metrics CAC Metrics CAC CAC 27% * Percentage of total customers who have engaged in advocacy for Influitive during a quarter Source: Influitive data
  26. 26. 26 Advocacy impact on LTV 26% Advocate Conversion 73% Advocate Monthly Retention Rate* 2108 Total Activities Advocacy Metrics LTV Metrics LTV LTV 48% MRR Churn Rate ARPU Cost to Serve (13%) 11% 4% * Cohort Analysis for June 2013 Source: Influitive data
  27. 27. 27 Integrated advocate marketing to drive lower CAC OutboundInbound Advocate WOM 1. Expanded referral program yields targets 4. Use advocate testimonials, case studies and references to rapidly close. 3. Add to nurture track. Tele-prospect to targets that show interest in content 2. Sponsored content appears in prospects’ social media feeds Example integrated campaign v
  28. 28. 28 Integrate advocates into account management process to drive higher LTV Demand / Value received AnnualSubscriptionRevenue By asking your happy customer to do a reference call with your unsatisfied customer… …you can often get the unsatisfied customer to understand how to drive more value from your product… …and you might even get your satisfied customer to upsell into a more appropriately- priced product offering Source: Scout Analytics
  29. 29. 29 QUESTIONS? @markorgan @influitive
  30. 30. APPENDIX
  31. 31. 31 Marketers are no longer in control of the buying process 0% 10% 20% 30% 40% 50% 60% 70% 2006 2010 2014F Dependence on knowledgeable peers in the buying process (B2B software buyers) Initiates process Initiates contact Purchase complete 75% of buying process complete before B2B buying interacts with company! 75% 25%
  32. 32. 32 Experience is poor for advocates today What advocates seek: Status Recognition Career value Connections Part of the team Reputation Perks Feedback What advocates get: Neglect + Abuse = Annoyed Leads to Advocate disengagement
  33. 33. 33 Experience is also poor for B2B companies today No self service solution Weak integration and analytics Data is all over the place
  34. 34. 34 Our current paying customers include many leading software and technology companies
  35. 35. 35 AdvocateHub has truly changed the way some of the best B2B companies run their businesses “Without hyperbole, I literally could not do my job without Influitive.” –Fred Bals, Customer Relations Manager, Ektron “Whether in a presentation, as a reference, or through a referral, no voice is more powerful than that of a satisfied customer, and our Influitive AdvocateHub, O- Zone, helps us amplify that voice.” –Frederick Kerrest, COO & Co-Founder, Okta “After Act-on launched our Influitive AdvocateHub, our motto became: I have a marketing initiative, how can Influitive help?"” –Jeff Linton, Sr. Product & Field Marketing Mgr., ActOn “Mobilizing 1,000 advocates with a few simple key strokes is pure genius.” –Deena Zenyk, Marketing Mgr., SMART Technologies

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